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Let me start this discussion at 50,000 feet with the question, “What are the most important sectors of California from both a political and economic basis?” I believe there are several such sectors:

First, is the agriculture industry which is the top exporter of agriculture products in the world.

Second, is the entertainment industry which is also the top such industry in the nation and the world.

Third, is the Hi-tech industry which is known to us as Silicon Valley, which is the greatest economic engine in the State and probably the Nation. Without Silicon Valley’s economic success California would be like the country of Greece. One of the candidates in the U S Senate debate indicated the number of jobs added in the last 20 years in the Los Angeles Basin was close to zero.

Fourth, is the public Higher Education System in the State, which is second to no other state or for that matter probably to no other nation. The University of California System, known to us as the U C System, along with the California State Universities known as the CSU System, combined represent this Higher Education System in California.

I could talk about how each of these industries are faring in our economy but I believe the four mentioned above are the most important industries and I consider the crown jewels of the State. But there are also the tourism and the aerospace industry which round out most of the State’s economy. I am only going to discuss the blight of the UC System and the Cal. State Universities known as the CSU System as one of the crown jewels of the State.

This subject is becoming more and more popular as you read the daily newspapers. It came to my attention during my campaign for the June 7th 2016 Primary Election for U S Senate. Probably the most startling fact that got my attention was that the U C System was being forced because of insufficient funding by the State of California in its annual budget to admit more out-of-state students. This is because the non-resident students pay approximately three times what the in-state residents pay, $12,240 compared to $37,000 a year, for tuition alone. According to a recent study by the League of Women Voters of California, the State has decreased the level of funding from the General Fund each year from approximately 18% in 2000 to about 11% or 12% this year. This is a one-third reduction in the level of funding.

The actual number of out-of-state or out-of-country non-residents is approximately 18,000 in academic year 2014-15. According to a recent audit by the California State Auditor Report this increase in non-resident student tuition generated over $700 million, a growth of $400 million from fiscal year 2010-11. To give you a perspective of total costs of the UC System the total employee salaries for the same 2014-15 fiscal year was $13.0 billion.

Based on information in a recent study by the Public Policy Institute of California (PPIC) the expenditures in the last 10 years for higher education, both UC System and CSU System, has fallen 9 percent from 18 to 11% of state total general fund expenditures. Meanwhile general fund expenditures for corrections and rehabilitation have increased 26%, with California spending more on corrections and rehabilitation than it does on its public universities (UC and CSU combined). It should be noted according to the State Auditor’s Report that prison population increased by 1% while UC and CSU enrollment increase by 13 percent.

Getting back to the overall subject of the financial decline of the Universities overall: we need to be sure our best and brightest students in California have every opportunity to succeed in these schools and be able to grow our State into a leadership position in the nation and in the world.

Are we giving our best and brightest resident students the opportunity to learn at California’s best public university systems?

The answer is NO because there are over 18,000 non-resident students, from both out of state and out of the nation, being admitted to the two university systems to provide for the higher tuition. The tuition is three times higher, again $12,242 versus $37,000 tuition per year per student. We are in effect selling one of the great crown jewels of the State to the non-residents because we believe, the State government believes, we can’t afford to support the two higher education systems in the state—UC and CSU.

What about the other public schools in the State?

At the same time, we are taking care of the K-14 schools, including the community colleges, with about 40% of the state general fund expenditures guaranteed under Proposition 98 passed several years ago. Prop 98 provided an increase of $3.9 billion last year to support the K-14 schools over the prior year, while UC and CSU each received about a $25 million increase in comparison. This leads to no other conclusion by me than that we are not adequately funding these university systems and there are allegations that the non-resident students who are being admitted are not as well qualified academically as the resident students who are not being admitted. The recently issued California State Auditor’s Report goes into this allegation in depth.

What has been done recently by the State legislature to address these issues?

Assemblyman Kevin McCarty, from the Sacramento area, in the most recent legislative session sponsored Assembly Bill AB1711 that attempted to address the underfunding of the higher education universities. This bill originally had established a cap on the number of non-resident students allowed to be admitted to the UC System. I believe it was 15% each year. It passed the Assembly Education and Appropriations Committee and passed the Assembly without any negative votes.

It then was taken to the California Senate Education Committee where it was modified and a hearing was held on the merits of the bill. It was modified to remove any cap on the number of non-residents to be admitted each year and only required that the number of non-residents admitted had to have academic qualifications equal to the median level of the top half of the resident students who admitted in the same year.

Because I felt passionately about this issue I recently testified before the California Senate Education Committee as a private citizen to support AB 1711. As I just discussed the original bill attempted to put a specific cap on the number of non-resident students who could attend the UC System schools. It was modified in the Senate to only specify that the non-resident student applicants had to have academic scores at least equal to the median scores of the top half of the resident students applying.

In my testimony that I submitted in the AB 1711 hearings, I included two recommendations.

I recommend that the members of the legislature that support AB 1711 consider an amendment to the bill that would provide an automatic increase in state appropriations to the UC System Universities. This increase should be proportionate to the required percentage increase under Proposition 98 each year for K-12 and Community Colleges.

I recommend that in order for the UC System to receive the increased appropriations, it would have to adjust its operating expenses downward by one half of the increase in appropriations required in the first amendment above for at least the first three years to get the UC System’s financial condition on a sound basis.

After lengthy hearings on the Bill that included my testimony, which I also submitted to each member of the Committee, the Bill AB1711 was defeated by a vote of 4 to 3.

But it should be noted that earlier in the Annual Budget Act there was wording requiring the Universities to increase the number of resident students in the upcoming academic year and asking the U C System to establish a cap on admission of non-resident students. Recent Press Releases indicated that the U C System is going to admit 1,000 more resident students this forthcoming year than the previous year. Time will tell whether the UC System establishes a cap.

What are the Options that I believe should be considered in the future to address this issue?

The American Dream of excellent higher education for the best and brightest of our California high school students advancing to California’s public higher education universities must be improved. This is necessary to provide the graduate students from the universities to fill the more sophisticated jobs of the future. We need diversity in the universities to enrich the education environment of the students attending the schools. But we do not want to sell the opportunity of the resident students to attend these higher education universities to raise enough funds from the non-resident students to pay for the total cost of providing the education at these universities. The State of California needs to step up and increase the funding of the resident students’ education and provide for a larger number of resident students to attend the UC System and CSU System.

Following are the three alternative solutions I believe the State should consider:

First, the most logical would be to increase the appropriations from the General Fund back to the 18% it was 10 years ago compared to the 11% today. As I mentioned earlier there has been about a 13% increase in the number of students overall in the last 10 years per the State Auditor’s Report with a decrease in funding of 9%. This compares to corrections and rehabilitation funding that had an increase in appropriations of 26% but an increase in prisoners of only 1%, again per the Auditor’s Report.

Second, have the Legislature or a group of citizens put forth a new Proposition similar to Proposition 98, which provides 40% of the General Fund to K-14 grades. This new proposed proposition, call it a new Proposition 98, would provide an adequate amount of funds by increasing the funding from 11% to 15% or 18% of General Fund Expenditures that it once was 10 years ago.

Three, have the legislature or a group of citizens put forth a new proposition that would expand the scope of the original Proposition 98, in force today, to include both the UC and CSU schools as well as the K-14 grades it covers today.

Summary Comments:

Another alternative solution could be a cap on the number of non-resident students. This would only help the admission of resident students if funds were provided to make up for the loss of tuition from decreasing the number of non-resident students NOT admitted.

Obviously this is a very difficult challenge for the State and the Universities to solve. One of the Legislative Offices suggested I meet with the President of the

U C System, Janet Napolitano, to discuss my ideas and see if there is anything I could do to help pursue any of the proposed possible solutions I discussed and get her input on the solutions she is pursuing. I would also appreciate any input from people in the audience for me to consider.

I would like to recommend two amendments to the final AB 1711 bills which you were one of the major sponsors. I recommend that you and the other members of the legislature that support AB 1711 consider an amendment to the bill that would provide an automatic increase in state appropriations to the UC System Universities. This increase should be proportionate to the required percentage increase under Proposition 98 each year for K-12 and Community Colleges. Furthermore, I recommend that in order for the UC System to receive the increased appropriations, it would have to adjust its operating expenses downward by one half of the increase in appropriations required in the first amendment above for at least the first three years to get the UC System’s financial condition on a sound basis.

Whether I am successful or not as one of the final two candidates in the November general election, I will pursue these amendments until the bill AB 1711 passes both chambers or is defeated. Thank you for your consideration of these amendments.